Fair Value Measurement And Accounting Conservatism Study

From the spring of 2006, the U.S. subprime mortgage crisis triggered a progressive upheaval in the international financial markets. At the same time, fair value accounting face kinds of questions. Based on the point of robustness of accounting, study how the application of fair value to impact the accounting information quality in China's capital market, that is to study the impact relationships between the use of fair value and the robustness of accounting.Firstly, by reviewing the literature, overview the measurement of fair value and accounting stability, then elaborates on the theory, and finally this paper use the model of relationship between earnings and share price returns to study the robustness of the Public Company Accounting changes, testing the impact of the application of the fair value on accounting earnings. In study, descriptive statistics and regression results showed the existence of the robustness of accounting in the listed companies. In addition, we found, the listed companies which have changes in fair values of listed companies showed greater accounting robustness, the application of fair value accounting will not necessarily lead the stability of the conclusions to decrease.Through this study we also found that:In 2007, after a round of bull market from 2006, China's market has an irrational rise. In such extreme cases, the assets at fair value through profit or loss would be exaggerated and adjusted, capital market risk will be amplified, when the market bubble burst, the risk will aggravate the crisis, Lead to the great deal of volatility in fair value accounting information. But the strong income volatility can cause uncertainty, and thus will reduce the robustness of accounting information. The accounting robustness requires enterprises not to overvalue assets and possible return, and confirm the possible loss promptly in the presence of strong uncertainty. That is obviously unrealistic, because when the economy is prosperous, assets tend to be overvalued, the fair value of assets at this time may deviate significantly from its value, but also resulted in the decline of conservatism.In 2008, the market decreased for the financial crisis, trading volume fell sharply, economic contraction and lack of liquidity in the market, the basic conditions for the use of fair value-in an active market has to some extent lost. In this case, the assets at fair value and adjust the gain or loss will be reduced, fair value accounting information relevant volatility also smaller, although this will still result in earnings volatility uncertainty, then will reduce the robustness of accounting information, but its effect on accounting conservatism much smaller.In 2009, the financial crisis had a certain relief, the domestic market began to recover by some extent, especially after the introduction of 4 trillion investment plans of the Central, trade began to pick up, trading volume began to increase dramatically. At this point, although the market has become actively, but companies still use the fair value measurement cautiously after the financial crisis, relatively more mature, so the robustness has not declined.Of course, we can see that:2007-2009 China in the face of the financial crisis has taken a variety of measures, and these measures are more or less affect the stability of the Public Company Accounting. Limited to research conditions and their own restrictions on the level of research, this article does not exclude other factors, so that the results have certain limitations.However, we can see clearly:from the U.S. subprime crisis, many market participants raised serious doubts on fair value. Personally, I think that the fair value has both advantages and disadvantages, we can not blame its application comprehensively. In specific applications, we should pay attention to the applicable conditions and not abuse it.